You are using an older browser version. Please use a supported version for the best MSN experience.

The 5 best (and 5 worst) states for business

24/7 Wall St. logo 24/7 Wall St. 2/26/2015

Job market, wages, education among the key factors
(From left) New Orleans at sunset & Salt Lake City Skyline.  John Coletti/Getty Images; strickke/Getty Images © John Coletti/Getty Images; strickke/Getty Images (From left) New Orleans at sunset & Salt Lake City Skyline. John Coletti/Getty Images; strickke/Getty Images While the United States was founded on the principle of equality for all people, the 50 states are decidedly unequal in providing opportunities for business. For companies choosing to locate in the United States, deciding the state in which to base their operations can be very difficult.

To determine America’s best states for business, 24/7 Wall St. identified nearly 50 measures that contribute to the business climate and reviewed them in each of the 50 states. The measures were classified into eight larger categories that independently measured various risks and benefits of doing business in each state.

The health of a state’s economy, the result of a confluence of factors, is perhaps the most important consideration for businesses choosing a location. The growth of economic output in 2013 in seven of the 10 best states for business was greater than the national GDP growth rate of 1.8%.

Another indication of a healthy economy, the job market, was also strong in the 10 best states for business. All of the 10 states had unemployment rates below the national unemployment rate of 7.4% in 2013. Four of the worst states for business had unemployment rates that exceeded the national rate. (View the full methodology for this study at 24/7 Wall St.)

Although the type and size of operating costs vary considerably between industries, wages are a major expense for many businesses. The average wage and salary in three of the 10 best states for business was roughly in line with the national average of $50,012 in 2013, while in five other states, average wages were below the national figure.

Read on for the 5 best (and 5 worst) states for business, or view the full report at 24/7 Wall St.

5th Best: Delaware
Wilmington, Del. skyline at the confluence of the Christina River and Brandywine Creek. Denis Jr. Tangney/Getty Images © Denis Jr. Tangney/Getty Images Wilmington, Del. skyline at the confluence of the Christina River and Brandywine Creek. Denis Jr. Tangney/Getty Images  > Real GDP growth, 2012-2013: 1.6% (20th lowest)

> Average wages and salaries, 2013: $51,093 (12th highest)

> Pct. of adults with bachelor’s degree, 2013: 29.8% (19th highest)

> Patents issued to residents, 2013: 453 (15th lowest)

> Projected working-age population growth, 2010-2020: 8.9% (15th lowest)

Based on several factors, Delaware’s regulatory climate was the most favorable nationwide for business. With high percentages of tech workers and strong independent investments, Delaware is also among the best states for innovation. More than 21% of all jobs in the state were STEM jobs, the eighth highest proportion in the country. The average venture capital investment of nearly $14.2 million per deal in 2013 -- the second highest such figure nationwide -- also reflects the high level of innovation and easy access to capital in the state.

Not so strong was Delaware’s infrastructure, which rated worse than most states. However, the consequence for businesses may be relatively small as businesses are concentrated in industries not especially dependent on transportation. For example, the financial industry, in which goods and services are relatively intangible, accounted for 42.1% of state GDP in 2013, the highest such contribution nationwide.

4th Best: South Dakota
Rapid City, SD.  Walter Bibikow/Getty Images © Walter Bibikow/Getty Images Rapid City, SD. Walter Bibikow/Getty Images  > Real GDP growth, 2012-2013: 3.1% (9th highest)

> Average wages and salaries, 2013: $36,818 (the lowest)

> Pct. of adults with bachelor’s degree, 2013: 26.6% (17th lowest)

> Patents issued to residents, 2013: 129 (6th lowest)

> Projected working-age population growth, 2010-2020: 3.7% (6th lowest)

No state had a lower cost of doing business than South Dakota. In particular, the cost incurred from wages was the lowest nationwide, with a statewide average wage of just $36,818 in 2013. While residents have relatively low wages, they also have a generally high quality of life and low cost of living. For instance, there were 78.8 art, entertainment and recreation establishments per 100,000 state residents in 2012, the second highest rate and nearly double the comparable national figure. South Dakota also boasts affordable housing and low tax burdens. The annual median cost of owning a home was equal to 28.2% of the median household income in 2013, among the lowest affordability ratios. In fiscal 2011, state residents paid 7.1% of their incomes in state and local taxes on average, nearly the lowest tax burden nationwide. Both businesses and the working age population benefitted from a low unemployment rate. Just 3.8% of the labor force was unemployed in 2013, the second highest rate in the county.

3rd Best: Wyoming
Wyoming State Capitol in Cheyenne, Wyo. Denis Jr. Tangney/Getty Images © Denis Jr. Tangney/Getty Images Wyoming State Capitol in Cheyenne, Wyo. Denis Jr. Tangney/Getty Images  > Real GDP growth, 2012-2013: 7.6% (2nd highest)

> Average wages and salaries, 2013: $45,751 (23rd highest)

> Pct. of adults with bachelor’s degree, 2013: 26.6% (17th lowest)

> Patents issued to residents, 2013: 113 (3rd lowest)

> Projected working-age population growth, 2010-2020: 8.8% (3rd lowest)

With the best tax climate for business in a recent Tax Foundation report, and the lowest cost of living in the nation, Wyoming was especially affordable for businesses. The state had the lowest cost of living of any of the 50 states while at the same time the local per capita personal tax burden as a percentage of per capita income was the lowest in the country. But while Wyoming scored well in most categories, the state fared poorly in several particular metrics. For instance, it had the nation’s worst gender income gap. One anomaly within the state is in education. While Wyoming had the best high school graduation rate in the country of 93.5% -- at least partially a result of spending $17,758 per student, the third highest expenditure in the country -- it ranked next to last in the country with only 11 post-secondary schools within its borders.

Related at 24/7 Wall St.: The best states to grow old in

2nd Best: Massachusetts
Boston Skyline at Sunset. Swapan Jha/Getty Images © Swapan Jha/Getty Images Boston Skyline at Sunset. Swapan Jha/Getty Images  > Real GDP growth, 2012-2013: 1.6% (23rd lowest)

> Average wages and salaries, 2013: $60,307 (3rd highest)

> Pct. of adults with bachelor’s degree, 2013: 40.3% (the highest)

> Patents issued to residents, 2013: 6,409 (4th highest)

> Projected working-age population growth, 2010-2020: -0.6% (4th highest)

Massachusetts led the nation in technology and innovation, due in large part to the high volume of research institutions, highly educated workforce, and the abundance of technology and science positions. Nearly 24% of all jobs in the state were STEM jobs, second only to Washington. And Massachusetts was home to 185 post-secondary schools, one of the highest figures. Also, more than 40% of state adults had at least a bachelor’s degree in 2013, the highest proportion in the country. Many college grads likely helped bolster innovation in the state. There were 6,409 patents issued to Massachusetts residents in 2013, the fourth highest figure in the nation.

Although the cost of living was very high compared to the other best states for business, this did not lower the high quality of life of many Mass residents. Less than 4% did not have health insurance in 2013, the lowest rate nationwide. Partly as a result, the United Health Foundation ranked the state third in the country for health.

The Best: Utah
Utah State Capitol in Salt Lake City. Kenneth C. Zirkel/Getty Images © Kenneth C. Zirkel/Getty Images Utah State Capitol in Salt Lake City. Kenneth C. Zirkel/Getty Images  > Real GDP growth, 2012-2013: 3.8% (7th highest)

> Average wages and salaries, 2013: $42,693 (16th lowest)

> Pct. of adults with bachelor’s degree, 2013: 31.3% (14th highest)

> Patents issued to residents, 2013: 1,228 (23rd highest)

> Projected working-age population growth, 2010-2020: 20.5% (23rd highest)

Utah is the best state in the nation for business, faring among the best in all of the categories reviewed in 24/7 Wall St.’s independent business climate assessment. Over the 10 years from 2010, the state’s working-age population is projected to grow by 20.5%, the second highest among all states and more than four times the estimated national average growth rate. Businesses are also choosing to locate in the state as the number of non-government establishments grew by 2.5% in 2012, the second fastest growth rate and also twice the comparable national growth rate. In addition to an expanding workforce and business community, residents and businesses alike have the benefit of affordable housing and a safe and high quality of life. Owning a typical home cost 27.6% of the median household income, one of the lowest affordability ratios. There were also 209 violent crimes reported per 100,000 residents, the eighth lowest violent crime rate in the nation.

Utah also had among the most well-functioning transportation infrastructures, ranking among the highest in this category. Zero miles of state roads were in disrepair in 2013. The percent of deficient bridges in the state was also the fifth lowest nationwide. Workers had an average commute time of 21.2 minutes, one of the lowest in the country.

Read on for the 5 worst states for business, or visit 24/7 Wall St. for 5 more of the best states.  

5th worst: Alabama
Lighning storm in Atlanta. Eyebeam Photography/Getty Images © Eyebeam Photography/Getty Images Lighning storm in Atlanta. Eyebeam Photography/Getty Images
> Real GDP growth, 2012-2013: 0.8% (8th lowest)

> Average wages and salaries, 2013: $41,578 (12th lowest)

> Pct. of adults with bachelor’s degree, 2013: 23.5% (7th lowest)

> Patents issued to residents, 2013: 503 (16th lowest)

> Projected working-age population growth, 2010-2020: 2.6% (16th lowest)

While the conditions for most businesses are on the whole unfavorable in Alabama, small businesses are relatively well funded in the state. Small business loans totaled $4,664 per small business employee, the second highest nationwide. The state’s redeeming qualities did not go much further than that, however. Alabama had a relatively weak labor force and economy, faring poorly in those categories. Less than 24% of adults in the state had completed at least a bachelor’s degree, one of the lowest rates nationwide. Also, nearly 19% lived in poverty, the seventh highest rate in the country. The state’s economy is growing much slower than the nation as well -- GDP grew 0.8% in 2013 versus a national growth rate of nearly 2%. While 20.5% of all jobs in the state were STEM jobs, one of the higher rates, Alabama is not especially innovative by other measures. Venture capital deals are relatively infrequent, for example. While there were more than 13 deals made per 1 million people nationwide in 2013, only 0.83 deals were made in Alabama per 1 million residents, one of the lowest figures in the country

4th Worst: Mississippi
Biloxi, Miss. skyline. Denis Jr. Tangney/Getty Images © Denis Jr. Tangney/Getty Images Biloxi, Miss. skyline. Denis Jr. Tangney/Getty Images  
> Real GDP growth, 2012-2013: 1.6% (22nd lowest)

> Average wages and salaries, 2013: $37,572 (2nd lowest)

> Pct. of adults with bachelor’s degree, 2013: 20.4% (2nd lowest)

> Patents issued to residents, 2013: 161 (9th lowest)

> Projected working-age population growth, 2010-2020: -0.6% (9th lowest)

As in several other states with the worst business climates, Mississippi is very affordable for both residents and businesses. The cost of living in the state was the lowest compared to all states, and tax burdens for businesses and individuals tended to be low.

The state is still among the worst for business, faring the lowest in the nation in the innovation and labor categories. Less than 17% of all jobs in the state were STEM positions, the second lowest proportion nationwide. Venture capital deals were not only very uncommon, with 0.67 deals reported per 1 million state residents, but the deals that were signed were not especially valuable. The average investment was worth $350,000 in 2013, a fraction of the national average of more than $7.2 million. Mississippi was one of just 13 states where the working age population was projected to decline from 2010 through 2020.

Mississippi’s economy is also relatively weak. The state had the nation’s worst poverty rate, at 24% in 2013, and the unemployment rate was 8.6%, one of the highest rates in the country.

3rd Worst: Kentucky
Louisville, KY., skyline at night. David Liu/Getty Images © David Liu/Getty Images Louisville, KY., skyline at night. David Liu/Getty Images  
> Real GDP growth, 2012-2013: 1.6% (21st lowest)

> Average wages and salaries, 2013: $40,673 (9th lowest)

> Pct. of adults with bachelor’s degree, 2013: 22.6% (6th lowest)

> Patents issued to residents, 2013: 553 (19th lowest)

> Projected working-age population growth, 2010-2020: 2.3% (19th lowest)

Kentucky was ranked nearly the lowest for labor and human capital, finishing seventh and sixth worst for the percentage of adults who had completed at least high school and at least college, respectively. The low educational attainment rates likely contributed to the state’s 8.3% unemployment rate in 2013, which was seventh highest in the country, and to its 18.8% poverty rate, which was sixth worst in the nation. These measures helped the state receive the lowest rank in the economy category in the country. The cost of living in Kentucky was the seventh lowest nationwide, which likely eased the burden of relatively low wages. The average annual wages in the state were $40,673 in 2013, nearly $10,000 less than the national average of $50,012 and ninth lowest in the country. Adding to Kentucky’s limited attractiveness for business and affecting the residents' quality of life, the state had 28.6 art, entertainment and recreation establishments per 100,000 residents, eighth lowest in the country.

Related at 24/7 Wall St.: The richest county in every state

2nd Worst: West Virginia
Charleston, W. Va. on the Kanawha River. Richard I'Anson/Getty Images © Richard I'Anson/Getty Images Charleston, W. Va. on the Kanawha River. Richard I'Anson/Getty Images
> Real GDP growth, 2012-2013: 5.1% (3rd highest)

> Average wages and salaries, 2013: $39,652 (6th lowest)

> Pct. of adults with bachelor’s degree, 2013: 18.9% (the lowest)

> Patents issued to residents, 2013: 145 (7th lowest)

> Projected working-age population growth, 2010-2020: -4.1% (7th lowest)

West Virginia’s economy grew by more than 5% in 2013, the third fastest growth rate nationwide. As in several other fast-growing economies, the growth in West Virginia was largely due to mining activity. The sector accounted for 16.9% of GDP growth in 2013, the third highest such contribution in the country. Despite the strong economy, West Virginia is the second worst state for business, largely due to especially low rankings in the labor and innovation categories. No state had fewer residents with at least a bachelor’s degree than West Virginia, where 18.9% had done so as of 2013. West Virginia was also one of just 13 states where the working-age population was projected to decline from 2010 through 2020. At -4.1%, it was nearly the worst projected decline nationwide. Regarding innovation, there were just 0.54 venture capital deals per 1 million state residents, one of the lowest.

The Worst: Louisiana
Sunset over New Orleans. Sam Camp/Getty Images © Sam Camp/Getty Images Sunset over New Orleans. Sam Camp/Getty Images
> Real GDP growth, 2012-2013: 1.3% (17th lowest)

> Average wages and salaries, 2013: $44,828 (23rd lowest)

> Pct. of adults with bachelor’s degree, 2013: 22.5% (5th lowest)

> Patents issued to residents, 2013: 395 (13th lowest)

> Projected working-age population growth, 2010-2020: -3.2% (13th lowest)

No state fared worse on 24/7 Wall St.’s business climate index than Louisiana. The state is not the worst place to run all businesses, however. The manufacturing sector accounted for more than 20% of Louisiana’s economic output in 2013, the fourth highest such contribution in the country. Despite the strong sector, Louisiana generally provides poor conditions for business.

Nearly one in five residents lived in poverty in 2013 -- nearly the worst rate in the nation -- contributing to both the low quality of the labor force as well as a low quality of life in the state. The working-age population was projected to decline by 3.2% from 2010 through 2020, one of the worst declines in the nation. While nearly 30% of Americans had at least a bachelor’s degree as of 2013, only 22.5% of Louisiana adults had at least such a degree, also nearly the lowest rate. Poor education contributed to poor scores in innovation. The state was one of only a handful of states where the average venture capital investment was less than $1 million.

Visit 24/7 Wall St. to see 5 more of the worst states for business.

Related at 24/7 Wall St.: The poorest county in every state

AdChoices
AdChoices
AdChoices

More from 247wallst

image beaconimage beaconimage beacon